Arvo Corporation is trying to choose between three alternative investments. The three securities that the company is considering are as follows:

Tax-free municipal bonds with a return of 8.80%.

Wooli Corporation bonds with a return of 11.50%.

CFI Corp. preferred stock with a return of 9.80%.

The company's tax rate is 25.00%. What is the after-tax return on the best investment alternative? Assume a 50.00% dividend exclusion for taxes on dividends. (Round your final answer to 3 decimal places.)

a. 8.625%

b. 7.350%

c. 10.063%

d. 8.800%

e. 8.575%